On Thursday, October 23, the Trump administration announced sanctions on two major Russian oil companies to pressure Moscow to end the war in Ukraine. The news led to a rapid increase in international oil prices of over 5%, marking the largest single-day surge since June.
The price of U.S. West Texas Intermediate (WTI) crude oil futures rose by more than 5%, surpassing $61 per barrel. Brent crude oil futures also climbed to around $65 per barrel, achieving the biggest single-day surge since June 13 amid heightened tensions in the Middle East.
The United States imposed sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, following similar actions taken by European Union countries against Russia. The U.S. and Europe are trying to cut off Russia’s financial support for the conflict in Ukraine by targeting the energy export revenue channels. These two companies account for approximately half of Russia’s oil production and over 5% of global crude oil output.
Energy sales contribute to about one-third of Russia’s budget revenue. During the Biden administration, sanctions were already imposed on Russia’s third and fourth largest oil companies. With the announcement of sanctions by the Trump administration on Wednesday, the four largest Russian oil companies are now on the U.S. blacklist.
On Tuesday, October 21, the White House announced the cancellation of the planned meeting between Trump and Russian President Putin.
During a press conference on Wednesday, October 22, Trump stated, “I feel the timing isn’t right, and I don’t think the meeting will achieve the results we want, so it’s canceled. But we will reschedule in the future.”
In recent months, due to increased production by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, coupled with renewed trade tensions between the U.S. and China, oil prices have been falling back to the lowest levels in six months.
The U.S. Department of Energy recently conducted a tender to purchase crude oil when West Texas Intermediate crude oil fell below $60 per barrel to replenish strategic reserves.
Kyle Rodda, a senior financial market analyst at Capital.com, commented, “The U.S. action explains why they increased their strategic reserves earlier this week.” He added, “The Trump administration apparently believes that oil prices are at or below a reasonable level, low enough to drive policies that could impact global supply.”
Last week, the International Energy Agency (IEA) lowered its oil demand forecast while raising expectations for oversupply in the oil market in 2026 as OPEC and its allies increase production.
Wall Street analysts have also warned of an oversupply in the oil market by 2026.
Goldman Sachs predicts that by the end of 2026, the price of Brent crude oil will drop to $56 per barrel and West Texas Intermediate crude oil will fall to $52 per barrel.
Market observers point out that if sanctions further tighten Russian energy exports, oil prices may continue to rise in the short term. However, the long-term trend will still be affected by weak global demand and increasing inventories.